For all the talk of an ESG backlash, the reality is that investment in sustainable infrastructure remains keyÂ
Certain technologies are gaining traction while others are starting to struggle, particularly as governments relax climate targets. Low-hanging fruit including renewables continues to pull attention. But a truly net-zero economy will require far more than just low-carbon energy. The good news is that plenty of private infrastructure investors see the same opportunities. For governments, the key will be laying down the blueprint for LPs and GPs to follow suit.
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Big picture: Politics and pragmatism in sustainable investing
Despite the political backlash, the sustainable investing mega-trend is far from over.
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For infrastructure investors keen to do their bit towards global sustainability efforts, new challenges are coming to light all the time. From the growing risk of assets becoming stranded, to emerging approaches to account for and address embodied carbon, there’s now a whole new set of considerations that investors will need to weigh up, on top of all their usual financial and ESG metrics.
Key trends: Sustainability practices take next step towards maturity
What changes are underway in the sustainable infrastructure space? And how are investors adapting their practices as a result?
The rise of stranded asset risk
As climate change starts to bite and ESG rules tighten in many markets, investors face a substantial risk that their physical assets may get left behind.
The embodied carbon blind spot
More attention is being paid to the carbon emitted during an asset’s construction. But reporting issues are still holding back these efforts
Cube: Getting hands-on with climate adaptation
Rising climate risk demands a proactive approach to adaptation and mitigation, according to Cube Infrastructure Managers’ Aurélien Roelens, Erwann Duquesne and Tiffany Yang.
Infrastructure investments: Lean, green logistics machines
Infrastructure investors are acting now to ensure their logistics assets address resilience and sustainability, the two trends dominating supply-chain thinking.
Arjun: Facing up to climate risk
Investors need to robustly assess the impact of climate change on their assets, says Arjun Infrastructure Partners’ Rhyadd Keaney-Watkins.
EdR: The power of green covenants
Debt can be an effective way to achieve ESG targets across different infrastructure asset types, says Edmond de Rothschild’s Jean-Francis Dusch.
Spreading the data centres load
Rising demand for data centres, driven by artificial intelligence, poses significant sustainability problems. Could expanding into emerging markets help the sector clean up its act?
AIIM: Unlocking Africa’s potential
The continent’s infrastructure assets are increasingly appealing as impact plays for global investors, says African Infrastructure Investment Managers’ Tania Swanepoel. But long-term local knowledge remains essential.
Investment in tech requires a leap of faith
Technological innovations present an opportunity for emerging markets to leapfrog in the race to net zero, but can investors handle the risk?
Infranode: Net zero’s north star
The Nordic region is leading the way when it comes to progress towards net zero, says Infranode’s Carl-Emil Lindholm. But a significant amount of investment is still required.
Meridiam: Making the SDGs work in portfolios
The UN Sustainable Development Goals can serve as the basis for an effective impact investment process, argues Meridiam’s Thierry Déau.
Energy transition: Devil in the detail
Infrastructure now has its own high-level guidance on implementing net-zero strategies and transition plans. But given the sector’s breadth, do these frameworks need to go even further?
Infracapital: The evolving net-zero opportunity
Supportive regulation is good for the health of the sustainable infrastructure ecosystem and makes it easier for private equity players to step in, says Infracapital’s Alexia Savva.
Adaptable design, a flexible route to sustainability?
Adaptable design principles might enable greener infrastructure, if investors can stomach the upfront pain, writes Alastair O’Dell.
Palistar: Digital’s sustainable potential
By boosting connectivity, infrastructure investors have the power to address deep-rooted social issues and reduce emissions, say Palistar Capital’s Chester Dawes and Taylor Gillespie.
Addressing inequality: A bridge too far?
Addressing economic inequality might be a laudable aspiration for sustainability-minded infrastructure investors, but is it achievable?
Sustainability: The best of both worlds
It’s still early days, but efforts to marry nature-based solutions with traditional infrastructure are starting to attract more attention, writes Alastair O’Dell.
Ardian: The circular argument
Efforts to do more with the materials we already have are driving innovation – and investment opportunities – in waste management, say Ardian’s Daniel von der Schulenburg and Federica Vasquez.
Ridgewood: Sustainability from the bottom up
Lower-mid-market infrastructure in the US is a fruitful space for meeting sustainability goals, says Ridgewood Infrastructure partner Sam Lissner.
Infrastructure investors plan for the long term, so a changing climate cannot be ignored when assets could be held for not just years, but decades. The industry is alive to the challenges this presents, but also to the many opportunities, from battery storage to vertical farming, data centres to district heating, electrified ferries to green hydrogen and renewable energy to waste management. Decarbonisation can be positively embraced, and this report covers a wealth of ways to do so.
Big picture: Demand for infrastructure will outpace development of greener practices
The global urban population is projected to surge to 6.3bn by 2050, compelling the infrastructure sector to address the demands of rapidly growing cities.
Proving the value of sustainable infrastructure
The need for sustainable infrastructure is obvious to many, but some managers must walk a tightrope to navigate the anti-ESG movement.
Meeting investors’ ESG data demands remains a challenge for fund managers
Achieving standardisation in data remains the holy grail for infrastructure.
Getting to grips with supply-chain sustainability
Managers face a difficult task in managing impacts beyond their direct operations.
Waking up to biodiversity loss
Investors are under growing pressure to ensure developments are nature positive.
Infrastructure’s fundamental role in the sustainable development goals
Aligning goals with the SDGs must be supplemented with more specific measurement frameworks.
Finding the right way to offset carbon
Carbon offsetting is an inevitable part of net zero – and investors could benefit.
Avoiding obsolescence: Facing the future
Sustainability is key for long-term success, but investors must avoid excessive first-mover risk.
Taking Scope 3 further
GRESB’s director of climate change considers the importance of advancing Scope 3 emissions reporting in infrastructure, writes Erik Landry.
Ares Management: Climate-proofing the future
Opportunities around the energy transition and digital economies are starting to converge, say Ares Management’s Andrew Pike and Keith Derman.
Can net zero be reached?
The infrastructure sector has undoubtedly made progress towards achieving net-zero carbon emissions by 2050 but a shift in investment strategies is still needed to further support the transition.
Sustainability in high demand
Boosted by net-zero targets, infrastructure investors are bullish about clean energy opportunities.
Igneo: Acting sustainably is making a difference
Advancing sustainability must be a core focus for managers, says Igneo’s Niall Mills.
We need to talk about ESG
Private markets managers are alarmed by the number of investors that have become mistrustful of sustainable investing, writes Niamh Smith. While they remain confident that ESG adds long-term value, communication needs to be improved.
IFM: Pension funds must collaborate on systemic risks
The growth of pension systems presents an opportunity to work together to prioritise long-term solutions for responsible investing, says Luba Nikulina, chief strategy officer at IFM Investors.
Data centres are at a crossroads
Demand for data centres is growing exponentially. Christopher Walker investigates whether that growth can ever be green.
Instar: ESG governance should be from the top down
Governance is often overlooked when discussing a company’s ESG strategy, but strong relationships and alignment at board and CEO level can mitigate against this, say Instar’s George So and PRT Growing Services’ Randy Fournier and Kim Stangeby.
Actis: Creating value through sustainability
Too many businesses treat sustainability as an afterthought, says Actis partner and head of sustainability Shami Nissan.
Infrastructure investors are the stewards of sustainability
Infrastructure assets are of critical importance to both local and global communities. Fortunately, investors can serve those communities without compromising returns.
Ports are ‘quay’ for offshore wind
Ports need investment to support the rollout of offshore wind, but a lack of certainty means many investors are reluctant to finance upgrades.
Ridgewood: Sustainability’s low-hanging fruit
Ridgewood Infrastructure’s Sam Lissner shares his experience of what investors can achieve in the mid-market.
On the minds of the sustainability experts
Better data, increased awareness and thoughtful regulations are needed around sustainable investing to drive more informed decisions, says our panel.
Cube on the future of waste management in Europe
Ambitions to create circular economies are creating attractive infrastructure investment opportunities, say Cube Infrastructure Managers’ Stefan Weis and Ambroise Bayen.
New opportunities appearing in the circular economy
The drive for net zero and the energy transition are creating substantial opportunities in the circular economy, enabled by new technologies and processes.
Edmond de Rothschild: No slowdown for sustainable investment
Short-term economic pressures fail to dampen the ever-increasing number of sustainable infrastructure investment opportunities coming to market, says Edmond de Rothschild’s Jean-Francis Dusch.
Biodiversity replacement ‘is not enough’
New rules coming into force in the UK will prove demanding for infrastructure investors and other developers, writes Elisabeth Jeffries.
War in Ukraine and the ensuing energy crisis have shaken up the sustainability agenda this year. The key question for the infrastructure industry is no longer whether renewables investment needs to accelerate, but how quickly in order to relieve cost pressures and supply shortages. Our Sustainable Investing special report addresses the headwinds facing investors, and takes a deep dive into 10 key ingredients of a successful ESG strategy.
Greening the world’s vast infrastructure is a costly mission. So far, the asset class has stepped up to the mission in robust fashion – $19 billion was raised for renewables strategies in H1 2021, according to Infrastructure Investor data, up from $7.5 billion for the whole of 2015. But to deliver net zero by 2050, private capital will need to commit even bigger numbers.
Although covid-19 has dominated the world’s attention lately, it also provides lessons for the infrastructure industry that will accelerate what had already been rapid change in sustainable and impact investing. The pandemic has sharpened focus in governments, society and industry on the importance of social and environmental progress.
Climate risk is far more predictable than covid-19, which means investors can plan for how to protect their returns from the climate threats that we all see coming.
To say that the issue of impact – and specifically the impact of global warming – has risen up the agenda of investors in recent years would be something of an understatement. For managers, that raises the question of resilience: just how do you adapt infrastructure assets to cope with climate change? And how do you quantify that risk? And who exactly should pay for it? Our Sustainable Investing report looks into whether resilience funds are the answer. It also delves into the burgeoning sector of impact investing to see what this has to offer for managers looking to establish their ESG credentials.
Click here to access Infrastructure Investor‘s in-depth special reports covering a wide array of topics, plus our digital magazines.
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